To measure or not to measure?
Executives need to understand the impact of the time and cost invested in innovation on their outcomes. Also, if research and development dollars will help build new products, and when these new products will achieve higher gross margins. In addition, they would want to provide strategic direction by signaling shifts in priorities, guide resource (re)allocations, and assess effectiveness of innovation spending to diagnose and improve innovation performance. In a nutshell, executives must look at the futuristic value of their organization and its products with an investment in innovation today.
While the portfolio measures look at business impact through revenue, market share, funding, customer loyalty, and lifetime value, it is also necessary to measure organizational impact on employee engagement, capability maturity, and reputation.
However, there is also the ‘measurement trap’ that organizations need to avoid. Metrics place more emphasis on the outcomes over process effectiveness. Organizations may tend to measure what is available because some of the performance metrics will lag by a year or two. And sometimes, the metrics-based measurements incentivize incremental innovation over disruptive ones. While innovation can be incrementally delivered, the measurement trap carries the risk of steering the organization away from disruptive thought processes which will eventually normalize the innovation model that once delivered success in one specific area. To avoid these traps, organizations need to define what success looks like and how it ties into the future vision for the organization and the innovation’s contribution.
In short, the futuristic measurement framework for innovation starts with understanding the building blocks of innovation first and configuring a special set of measurements to evaluate the effectiveness of each block. Some steps rely on traditional measurement methods like:
• Number of focused voice of the customer (VoC) sessions conducted per each product of innovation or project
• Continual feedback sessions with end users (usability and accessibility sessions)
• Number of lateral thinking sessions and the relevant ideas generated from those sessions
• Interval measurement from idea to prototype
Some innovators take a strong ‘anti-thesis’ path to measure failures:
• Amount of disruption brought in – composition of focus teams (outsider and insider ratios, and the like)
• Failed attempts to show effectiveness of experimentation is equal to the value gained by experimentation
• Determining how quickly the experiments are failing
Scaling of innovation calls for a simple yet pragmatic approach toward expanding outcome-based models in domains like healthcare. Every organization has an in-built culture of innovation that needs to be used to its full potential, to derive best results. Results from more implementations are necessary to correlate and perfect these models and in time, might evolve into a full recipe of setting up a framework to scale innovation.
Breaking down the specific definition of innovation for a given portfolio is necessary and needs an ecosystem to be created within the portfolio to promote an innovation culture. Insistence of the first-time right approach might not provide the best results. Hence, we should aim to fail fast and maintain outcomes to not fall into a ‘measurement trap’, where we tend to quantify results faster, instead of measuring their quality.
The author of this white paper would like to acknowledge the invaluable contribution of Sundara Rajan Subramanian (Delivery Manager) and Sakthi Vinodhini Muruganantham (Managing Partner) and thank them for their fresh perspectives and insights.